When you’re just getting your startup off the ground, you’re open to a lot of vulnerabilities that you probably aren’t aware of. Read on to learn about five critical ways to protect your new business: from the type of insurance you need and the security measures you need to take to protect your brand to deciding on a business structure.
When it comes to business insurance, more is always better. Having the right business insurance coverage can make the difference between your business’s survival or failure. Consider the following five categories of insurance to protect your new business:General liability. To protect your business from lawsuits related to accidents caused by your product or service, you need general liability insurance. In addition, some industries require specific liability coverage. For example, consultants and accountants often receive “fault and default” insurance to protect against lawsuits over negligence. Car. If your new business plans to provide commercial or vans, you will need separate business auto insurance to cover business driving. Property and Accident Insurance. You need property and casualty insurance to protect your business from damage and loss to property and environments, such as fire and burglary. You may need additional coverage if you live in an earthquake or flood zone.Work-related insurance. In most cases, if you have employees, you are required by law to have work accident insurance, unemployment tax and, in some states, disability insurance. There are exceptions for sole proprietors and some business owners, so check with the office of the Secretary of State in your home state for employment insurance requirements.
In addition to the standard coverages, you may also want to protect your business with business income insurance, cybersecurity insurance, and key man insurance, which covers the business for a period of time if a critical member of the business dies.
In addition to obtaining insurance in the event of a data breach, a new company must do its due diligence to ensure the breach does not occur. Preventive measures against ransomware and phishing attacks can save your company a future of headaches. Make it a priority to have a comprehensive cybersecurity plan. Get started by hiring a cybersecurity expert who understands your business and can explain all the potential threats to your company’s critical data. Then draw up an action plan and demand that all employees adhere to it. With more employees working remotely, the likelihood of a data breach increases, especially if your staff isn’t trained to keep company information safe.
Your company’s intellectual property (IP) is a valuable asset; therefore, as a new business owner, you should do everything you can to protect it. Here are the differences between each IP address and how to protect yours.Trademark. A trademark is a word, phrase, name, design or symbol (or a combination of these elements) that identifies your company’s goods or services. Trademarks include your company name, product names, logos and slogans. A registered trademark protects the company from another company using the name, logo, etc. without permission. Trademark registration is done through the United States Patent and Trademark Office (USPTO) and must be renewed every 10 years.Patent. A patented invention gives an inventor (or company) the exclusive rights to manufacture, use, and sell an invention for a specified number of years. The patented property includes software processes and product designs, among other things. Patents are secured through the USPTO and must be original, useful and not obvious to others with basic skills in the field or industry. The patent process is very complex and most business owners are assisted by a lawyer, patent attorney or licensing firm.royalty. Copyrights protect “original works of authorship,” preventing others from duplicating or using the material without permission from the creator or owner. Copyright protection includes assets such as music, art, film, literature, website copies, blog content, marketing materials and computer code. Copyright registration is done through the US Copyright Office and is protected for the life of the author, plus an additional 70 years.
Include your company
The easiest (and cheapest) way to structure your new business is as a sole proprietor. However, as a sole proprietor, the state considers your business a “non-entity” and therefore there is no legal separation from the owner of the business. In other words, the owner is personally liable for the legal and financial debts of the company. So if the sole proprietor doesn’t pay its bills or is sued by a customer or seller, the owner’s personal assets can be seized to settle those debts.
For this reason, many new entrepreneurs choose to incorporate their business as a C Corp or Limited Liability Company (LLC). Corporations and LLCs enjoy limited liability because the corporation is a separate and separate entity by law. If the company fails to pay its debts or is sued, the business owner’s (or the company’s investors) assets are typically protected.
The incorporation of your new business begins at the office of the Secretary of State in your state. It includes filing paperwork, paying filing fees, and complying with state requirements for good standing. Since running a C Corp requires more compliance than an LLC, many business owners choose the LLC because of the greater flexibility the management structure offers.
There are several differences between C Corp and LLC tax structure, investor rules, and more, so it’s important to talk to your accountant and attorney about what makes the most sense for your business. But in general, both entities provide better protection for the entrepreneur’s personal assets than the sole proprietorship.
Keeping your business compliant
To give your business a good reputation and long-term survival, you need to keep your business compliant. Compliance rules cover everything from meeting annual filing deadlines to registering for various business licenses and permits to paying appropriate payroll taxes in the state(s) where your company does business.
Most states require registered corporations and LLCs to file a statement of information, known as an annual report, with the office of the Secretary of State. If your business sells products and services that are subject to sales tax, you also need a VAT license from the state tax authorities.
If your company conducts business in a state other than the state of incorporation, the state where the business transactions take place may require you to apply for a foreign qualification in that state. If you plan to have remote workers work in other states, in addition to paying payroll taxes in your home state, you must also register in the workers’ states. State regulations vary, so be sure to check with every state where you do business.
Finally, each state has its own threshold for economic nexus. If you achieve it, as an out-of-state business, you must pay sales tax to those states and comply with their rules and regulations.
It may sound complicated, but taking the time to protect your business from the start can help ensure your future success.
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